Media Freedom: Hetero’s response to statements of Director

The recent controversy surrounding statements made by the Director of Hetero Pharma (Mr. Srinivasa Reddy) in relation to compulsory licensing, which we covered here, and subsequent responses from Hetero, brings out a troubling issue for media freedom.

To contextualize, after Mr. Srinivasa made controversial statements regarding Compulsory Licensing, Hetero was quick to distance itself from these comments, calling them ‘personal views’.  However, Hetero also went a step further to state “We are also taking up the matter with the requisite media agency asking them to be more cautious in publishing such statement on behalf of our organisation in future without checking the authenticity of the source publishing the statement.This statement is quite a mouthful!  And it leads me ask: how could a media house (ET in this instance) have been any ‘more cautious’? Clearly, Mr. M.Srinivasa Reddy professed himself to be the Director of Hetero Pharma, the Registrar of Company records show that Mr. M.Srinivasa Reddy is on the Board of Directors, Mr. Bhavesh Shah has admitted that he is on the Board of Directors (here) and Mr. M.Srinivasa Reddy himself has been giving other interviews on Hetero’s tie up in relation to Sofosbuvir (here). How much “more cautious” should ET have been? Does Hetero now expect media houses to keep up with their internal politics and grapevine? Does Hetero expect media houses to attend board meetings and assess the ‘mood’ and ‘pulse’ of the company? Will these irrational alternatives make them ‘more cautious’? What does Hetero expect?

Their reaction doesn’t stop here, Mr. Bhavesh Shah commented on this post clarifying “We wish to state that though at present Mr.M.Srinivasa Reddy continues to be on the Board of Hetero Labs Ltd, he has been exclusively looking after the operations of Indian Branded Generics Business vertical operated through Hetero Healthcare Ltd and Genx Pharma Ltd.

Accordingly, the views expressed by Mr.M.Srinivasa Reddy on Compulsory Licensing in India are the views of Hetero Healthcare Ltd but not necessarily the views of Hetero Labs Ltd, and other Group Companies.”

First, understanding those sentences requires a firm grasp of corporate law, good luck to us all! And second, how exactly is a media house expected to know about this ‘internal arrangement’? This is almost as absurd as asking you (the reader) what colour kurta I am wearing while typing this post! Moreover, this statement seems contradictory, given the fact that Mr. M.Srinivasa Reddy gave an interview to CNBC regarding the Sofosbuvir tie up.

As a matter of fact, hardships caused to outsiders who deal with companies due to internal decisions/proceedings that are not public documents, has been recognized by courts and company law has come up with a protection for such outsiders through the doctrine of ‘indoor management’. This doctrine protects individuals who seek to enter into transactions with the company and states that once documents such as the AoA, MoA and other public documents with the ROC are verified, outsiders are not bound to inquire into the internal proceedings of the company. For instance, an AoA may authorize ‘any director’ to sign a loan, in pursuance of which Mr. A (a director) signs a loan agreement. However, it may be later found that an ‘internal guideline manual’ (not a public document) states that only those directors whose names start with ‘S’ are authorized to sign loan documents. In this circumstance, the doctrine of indoor management protects the outsider, as he is not required to have had knowledge about these internal guidelines.

If company law protects millions of rupees worth of transactions by this doctrine, surely a media house can be afforded more protection. Therefore, outside of the records available to the public, the media should not be burdened with harrowing ‘due diligence’ requirements before covering a news item. Statements of Hetero asking new agencies to be “more cautious” before publishing news, create an inroad into freedom of reporting. Instead of trying to target the media, may be it would be a better idea for them to sort out their internal issues?

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